The Alpha Strategies

Vision Statements: How to do a Reality Check

Vision statements are typically defined as an aspirational description of what an organization would like to achieve in the long term.

Because this definition is so vague and vision development processes are  generally based on emotion and intuition rather than on an informed thinking process, many vision statements could use a reality check.

We want to show you how to do just that. Or, if you are trying to develop a vision, how to make sure it is grounded in reality.

The source of all visions: dominant strategy

The source of all visions is found in dominant strategy for the organization.

Vision statements become flawed when folks try to develop them as a first step in the strategic planning process without understanding dominant strategy. It should be the last step, a crisp sound bite that reflects where we want the organization’s dominant strategy to take us.

Think of strategy as choice of action. There are 8 choices, or strategies, common to every type of organization from for-profits and non-profits to public sector ones. They are always present and are being implemented even if there is no strategic plan.

Henri Fayol identified six of them on page one of the first book written on modern strategic management: General and Industrial Management.  Peter Drucker identified the other two, growth and business definition, in The Practice of Management.

Any one of these eight strategies can be the dominant strategy, also known as “core competency” of an organization.

Banks have financial management as their dominant strategy. Insurers, regulators, and pension funds will have risk as dominant strategy. Many retailers will have marketing/sales; while any organization creating proprietary products will typically have R&D/technology. Other organizations, such as Walmart, have chosen growth. There are many organizations that have service delivery as the dominant strategy. Service delivery is also known as production or as manufacturing, depending on the nature of the business.

The first step in strategic planning should not be about crafting vision statements. It should be about developing a deep understanding of each of the 8 strategies and how they are actually being implemented. That understanding then drives insight into what external factors are impacting each of the eight. It will also identify which of the eight is presently dominant strategy for the organization.

Vision statements go horribly wrong when they cannot be reconciled with dominant strategy. We define a vision statement as being a description of the hoped-for outcome of long term successful pursuit of dominant strategy.

In other words, before you can develop a vision statement, you have to know which strategy is the dominant one in your organization. Then you can think through the hoped-for outcomes that might be possible from long term pursuit of that dominant strategy.

When vision is not aligned with dominant strategy...

What happens when you don’t know what dominant strategy is? Let’s look at some examples that should make you cringe.

First up is a large government social housing agency whose vision statement was “to become the largest social housing agency in North America”.  What’s wrong with this vision? Well, for starters, the legislation in which the agency’s mandate (being the term nonprofits and government organizations use for the business definition strategy) is described, says nothing about growth. But the legislation says a great deal about being a landlord and providing housing for folks in need of housing. In other words, the mandate points to service delivery as the dominant strategy, not growth.

Fortunately, a new board and executive team for the agency made it their first order of business to change to vision to being about “landlord excellence”. In other words, they aligned the vision correctly with the organization’s dominant strategy of service delivery.

Or, how about the airport that retained a branding firm to develop its strategic plan? You guessed it. Branding firms are all about marketing/sales strategy. So it should come as no surprise that the airport ended up with a fancy new logo and a vision statement that looked like a marketing/sales strategy.  It read something like: “to be a portal to the world”.

This vision statement sure had airport employees scratching their heads. They were thinking, correctly we might add, that running an airport is all about service delivery, heavily influenced by risk, another of the eight strategies. As a frequent flyer, I know that I want airport management focused on service delivery, not marketing/sales. A new CEO came in and immediately changed the vision to being about service excellence.

Let’s look at one more example. This one is really interesting.  The vision for a government-run new home warranty program was “No more defects; no more claims”. It was explained to us that the intent was to reach for a vision that would put the organization out of business, if achieved.

The good news is that the first phrase, “no more defects” clearly addresses risk, the dominant strategy for any insurer. The bad news is that builders will never be perfect. They will always make mistakes. This means the only way to achieve the vision is to stop all builders from building new homes. That’s not going to be acceptable to builders, new home buyers, or to anyone else in the new home building industry.

Just as bad, though, is the second phrase in the vision, “no more claims”. This confuses the focus on risk by suggesting an equal focus on the financial management strategy, being the obligation of the warranty company to pay claims. Is the vision based on the risk strategy or the financial management strategy?

The takeaways on vision statements

-       If you must have a vision statement, make sure it is aligned with the organization’s dominant strategy 

-       Vision statements don’t come from thin air. They are a description of the hoped-for outcome from long-term successful pursuit of dominant strategy

-       There are 8 strategies common to all organizations and one of them is dominant strategy of the organization

For more on strategy, read The Alpha Strategies: Understanding Strategy, Risk, and Values in Any Organization available online everywhere.

 

 

 

 

 

 

 

Strategic Planning: A Review of Strategy

Strategic planning is a review of strategy. This is the first step in any strategy planning process; a review of current strategy.

Reading the literature on the subject, one could be forgiven for thinking that strategic planning is only concerned with strategy development. This is because there is a general belief that unless there is a strategic plan in place, there is no strategy to review. Yet we can name lots of organizations that have prospered for decades without a written strategic plan.

Every organization has a dynamic strategy system

Every organization has a dynamic strategy system in place whether or not the organization has a written strategic plan.

In fact, in our experience, many organizations have written strategic plans that are not consistent with the strategies actually being implemented throughout the organization. No wonder those plans never go anywhere.

Let’s first define some terms. We define strategy as being a choice of action.

Our research tells us there are eight choices of action / strategies common to all organizations from for-profits to nonprofits to public sector ones.

For more on this, see our book: The Alpha Strategies: Understanding Strategy, Risk, and Values in Any Organization (available at online retailers everywhere). 

Current popular wisdom has it that strategy has something to do with creating value or competitive advantage.

In our opinion, this definition is far too narrow and makes it impossible to see the eight-strategy system in place in all organizations. For us, this typical definition of strategy is simply a description of the marketing/sales strategy, one of the eight strategies in any organization.

Our definition of strategic planning is that it is a review of current strategy against changing relevant major stakeholder expectations and factors in the external environment to determine if change to strategy is warranted.

Start strategic planning with consensus on current strategy

Armed with our definition of strategic planning, the appropriate starting place for it is to reach consensus on what is currently being implemented within each of the eight strategies. You'll be surprised, if not shocked, at how little common understanding there is.

The most common cause for failure of a strategic planning process is the lack of a common understanding by the board or management team or both of current strategy. This, in turn, drives multiple personal change agendas. Individuals push their perceptions of the appropriate priorities to pursue based on a flawed understanding of current strategy.

Without a common understanding, it becomes impossible to identify the relevant external factors impacting strategy performance that the strategic plan should address. It is the correct identification and understanding of external factors that should drive any strategy change decisions.

Start thinking differently about strategic planning

• Start thinking of strategy as something much more than about creating value or competitive advantage. This definition is far too vague. It makes me think of a first year MBA's answer to the question: "What do you want to do after you graduate?" Invariably, it will be "I want to make a lot of money". Think about it. If your organization is seeing as doing a great job, folks will flock to it. How can the organization do a great job? It starts with seeing the bigger strategy system in your organization.

• Start thinking that strategy is present even without a written strategic plan. Strategy is a choice of action. All organizations that are up and running having already made eight basic choices whether or not those choices were ever written down in a plan. Those choices are now being implemented. The question becomes "Do you understand what is being implemented?"

• Start thinking that strategic planning is much more than strategy development. It's about understanding whether the strategies of the current strategy system are appropriate given a changing external environment and changing major stakeholder expectations. A strong understanding of those relevant external factors will point to whether current strategy needs to be changed or improved.

 

Strategic Planning: The Speed of Change

A question I get asked a lot is “How can a 3 or 5 year strategic plan possibly address a world that can dramatically change in a year?”

My answer borrows from Hemingway.  “Change, like bankruptcy, occurs in 2 speeds. It happens slowly and then all at once. The purpose of a strategic plan is to plan for change.”

The myth of disruption as something new

We are told we live in times of enormous disruption, as if change is something unique to the 21^st century. 

Clearly, someone hasn’t been following Downton Abbey.

For five seasons, the highly popular television series has been chronicling the impact of change on the lives of the landed gentry in Britain in the early decades of the 1900’s. The seeds of change were planted with the beginnings of the Industrial Revolution in the 1700’s. They took almost 200 years to bear fruit and create the full blown changes causing heartburn for Lord Grantham.

The reality is that change takes time to take hold and actually become a force to be reckoned with. What is commonly referred to as disruption is when change actually arrives.

Let's look at some examples. We were told that the advent of wireless in the 1990’s spelled the end of long lines and traditional telephone companies. It will happen. But it hasn’t happened yet. 

The Wright brothers were the first to prove airplane flight was possible. But it took another 25 years for the airline industry to become a reality. It took the airline industry another 30 years to dispatch ocean liners as the popular means of trans-oceanic travel.

Cheap manufacturing processes were supposed to destroy the craft industry. They haven't. In fact, the craft industry has gone through a tremendous revival.

Change is not only driven by technology

We are lead to believe technology is the source of all disruptive change. That view is very narrow and ignores other sources of disruptive change that can impact every aspect of the way organizations go about their business. Thinking technology is the only source of disruption will leave your business vulnerable to being blind-sided.

Consider the changes in manufacturing practices since The Love Canal environmental disaster in the 1970’s. This event marks the beginning of the end for unacceptable manufacturing processes in North America. But it has taken decades to result in better practices. The changes put a lot of folks out of business and a lot more into whole new businesses.

Change is fast transforming the workplace because of a changing and more diverse workforce.

The entry or exit by governments into markets, whether through a change in the laws or regulations or through a government agency, can be disruptive. Consider the impact Fannie Mae and Freddie Mac has had on the US housing market over the last many decades.

But, again, change doesn’t happen quickly and it isn't always about technology. Consider how many U.S. companies are now lined up to enter Cuba.

The key to managing change is to be ahead of it

The key to managing change is to be ahead of it by identifying and monitoring it.

This is the rationale for a strategic plan.

Setting goals and targets is the stuff of business plans - not the strategic plan. We see folks getting too busy setting goals for the coming years to have done the study necessary to understand that their goals are set on uninformed assumptions about emerging change and its impact on their strategy.

To separate the strategic plan from business planning, we define a strategic plan as being a review of the 8 strategies common to every for-profit and nonprofit organization. This leaves business planning as being something concerned with the implementation of the expectations of the strategic plan strategies.

Strategic planning must start with a deep understanding of how each of those strategies is currently being implemented.

This understanding enables the identification of external factors, either present or emerging, that might impact, for better or worse, the implementation of the individual strategy.

In other words, boards and executive management need to invest in understanding and monitoring what might impact their business definition strategy, known as mandate in nonprofits, their growth strategy, their risk strategy, their financial management strategy, their organization management strategy, R&D/technology strategy, manufacturing strategy, also known as service delivery or production depending on what the organization does, and, finally, their marketing / sales strategy, also known as the communications strategy for many nonprofits.

These eight strategies are the basis of the strategic plan and of all organization design.

Take-Aways for strategic planning

The take-aways for you to think about are “Is this how we look at strategy in our organization; namely, as a system of activities and choices of action that are inter-connected?” 

If you did, you would be able to structure a monitoring system centered on each of the strategies. You would be able to see change more clearly as it emerges. This puts you in a much better position to know when to change current strategy, given that emerging change.

The second take-away is that you will no longer think of change as immediate or disruptive. Instead, you will be wondering whether your organization needs to invest more in trying to identify and understand emerging change. And whether to invest more in the training, development, process improvements, and product/services development requirements required to be ready for that change.

That's what a strategic plan is supposed to address.

For more on strategy, see The Alpha Strategies, Understanding Strategy, Risk, and Values in Any Organization.

Strategic Planning: 3 Steps to Better Planning

 

There are 3 steps you can take to make your strategic planning efforts much better.

They all come from seeing strategy as a system of 8 choices of action rather than as a collection of mystifying vocabulary.

One: Understand current strategy

Make sure there is a common understanding of the current strategies of your strategic plan.

Only when you really understand current strategy are you able to understand what challenges the organization faces and the implications of changes to current strategy.

8 strategies are common to all organizations, whether they are for-profit or nonprofit. The board and the management team must have a common understanding of what those strategies are today (as opposed to what you want them to be) if they are to make an informed decision on changing strategy.  See: Strategic Planning: Where's the Beef?

The Eight Strategies Common to Every Organization

Business Definition (called Mandate in nonprofits): What the organization does. This strategy is also known as the “mission” statement although too many mission statements make the mistake of going way beyond a simple description of what the organization does.

Financial Management: How the organization sources capital and manages its finances.

Risk: How the organization identifies and manages those events, which if they occurred, would be unacceptable

Marketing/Sales (called “communications” in many nonprofits): How the organization identifies and captures customers/users/clients

Growth:  How the organization is getting bigger, smaller, or trying to stay the same size

Organization Management: How the organization is designed and managed

R&D/Technology: How the organization develops and/or uses technology

Service Delivery / Manufacturing / Production: How the organization fulfills the marketing/sale or communications promise of value delivery

Two: Understand current strategy configuration

You need to understand how the strategy system is currently configured in your organization.

There are 3 types of strategy (choices of action) common to every organization.

One strategy is always the dominant strategy, the Alpha, leading the other seven.  Three strategies are Influencers because they are the strategies that most constrain and guide implementation of the Alpha and the remaining four strategies, called the Enablers.

You need to understand this configuration for a number of reasons but most importantly because dominant strategy, the Alpha, is very well entrenched in all organizations and reflects the dominant culture. 

Not understanding dominant strategy can result in not understanding the organization. For example, not all universities have R&D as their dominant strategy. Many have Service Delivery while others are focused on Growth. The culture is very different within each because of this choice of priority.

For more on strategy and its configuration, see Drag'n'Drop Strategy: A Dynamic Model

Three: Test strategy changes for impact on the strategy system

A strategic plan is characterized by its focus on just one of the eight strategies as the catalyst for change over the planning period. This focus will impact all of the other seven strategies over the course of the implementation period.

Therefore, it is imperative to understand how the proposed change of one strategy is likely to impact the other seven.

For example, the decision by many banks to focus on the growth strategy in the period prior to the 2008 financial meltdown lead to a disastrous loss of control over the Financial Management and Risk strategies at those banks.

Bank management and boards were not looking at strategy as a system and therefore never saw the impact that a focus on growth was having on their dominant strategy of Financial Management or its key Influencer, Risk.

Conclusion: See strategy as a system to improve your planning

Strategy is a system; however, not enough board members and management teams see it that way.

As a result, they are making strategy decisions that are isolated and not well informed.  

Seeing strategy as a system enables a much richer understanding of how strategy actually works in your business or nonprofit and how change will likely impact current strategy.

For more on seeing strategy as a system, see The Alpha Strategies, Understanding Strategy, Risk, and Values in Any Organization

Strategy Storytelling - A Primer

Strategy storytelling is coming on fast. We think it's the next big thing in strategy and the future of strategy communication. And we are ready for it with our interactive drag'n'drop strategy storytelling site .

Research tells us that strategy understanding is at an awful low throughout most organizations. Present approaches to strategy communication, with their dependence on fancy words instead of plain English, are not working.

You know what I’m talking about; nonsense like a presentation on “grand overarching strategic imperatives”. What does that even mean? Or how about those mission statements that are actually embarassing to anyone listening because instead of being inspirational, they sound verging on delusional; or, at best, so, so trite.

Time to get serious and tell folks a story they can believe in about the business.

To tell a story, you need three things: interesting characters, a neat setting, and a good plot.

Interesting Characters: The 8 Strategies in Every Business

There are always eight roles or characters in any business story, whether it is a hospital or ACME Waxed Paper. And they are always the same characters; although depending on what role they get, they may behave quite differently from one business to the next.

There’ s Marketing & Sales ; a.k.a Communication in the nonprofit world. And Finances, Growth, Risk, R&D/Technology, and Organization Management, a.k.a.“People”.

There is Service Delivery, a.k.a. Production or Manufacturing, depending on the nature of the business. Finally, there is Business Definition, a.k.a. "Mission". It is known as Mandate in many nonprofits.

Now that we have the players, we need to understand the roles they will play.

In every business story, there are always three types of strategy roles.

One and only one of the eight characters plays the "leading" role of dominant strategy in any business; the Alpha role.

This strategy leads the remaining seven and sets the culture for the business as a whole.

This strategy is very hard to change and stays in place for long periods of time.

Think Marketing at Nike, Service at Four Seasons Hotels, R&D at Intel, Financial Management at Banks, Risk at insurers and regulatory agencies, Growth at McDonald’s, Business Definition at IBM, and Organization Management in all sole proprietorships.

Three of the remaining seven play the role of Influencers because they are the strategies that most guide and constrain Alpha and the remaining four strategies, which we call Enablers.

For a quick overview on how these strategies work together, think how Risk, Technology, and Growth influence implementation of a typical bank’s Alpha, Financial Management, and its remaining strategies of People, Marketing, Service Delivery, and Business Definition. 

A Neat Setting: The Business Itself

For all business strategy storytelling, the setting always starts with the present.

It seems to be human nature to want to jump immediately to the future without understanding the present but that is folly in business strategy planning. How is it possible to understand what roles the characters are to play in the future or how they must change without understanding current state and roles those strategies play now ?

In all story settings, current state means truly understanding which is Alpha, which are the Influencers, and which are the Enablers.

The Plot: The Company Vision

The plot for business strategy storytelling describes where management and the board want to take the company. This is commonly called the vision.

We define vision as a description of the successful outcome of long term pursuit of dominant strategy, the Alpha. That’s why it is so important to understand current state of strategy ; the roles the eight characters are playing now.

A Fairy Tale Ending? That's for you to determine!

We don’t know how each business story will end. That's a job for management and the board to manage.

But we do know employees want to contribute to that success. They want to hear a story they can believe in on how you are going to accomplish that vision. That story will help them understand how they will be expected to contribute. And it is certainly going to music to the ears of the directors.

To give them a story, start with the present. You have to know each of the characters (strategies) in your business or nonprofit really, really well and be  able to tell them the role each plays and what each is doing now. Which is the Alpha? Which are the Influencers and Enablers. How do they relate to each other and set priorities and expectations.

Then you need to explain which of the 8 is going to be the focus of the strategic plan over the next 3 to 5 to 7 years. That’s what strategic planning is all about – a choice of one of the 8 strategies on which to focus. That focus over the planning period will pull all the remaining 7 into the supporting roles.

Visit our interactive drag'n'drop strategy storytelling site today and start developing your story.

Strategic Planning: Where's the Beef?

I get the whole approach to strategic planning.

I really do.

But I keep asking myself: "Where’s the beef?"

The current approach is usually explained to boards and management in four points:

• Where are we?
• Where do we want to go?
• How do we get there?
• How will we know we are there?

This explanation does not go far enough for me. I want more! Where's the meat in it? I wonder, as did a hamburger chain about its competitors: "Where's the beef?"

Here's how we would add the beef to each step.

Question 1: How do you determine where we are now?

Beefy Answer: Understand current strategy and the external factors impacting it. That will tell us where we are.

When we target a company for competitive analysis, we study its current strategy and the external factors impacting it. This should be the starting point for all strategic planning. Don’t assume board members and the management team share a common understanding of current strategy. The research does not support that assumption.

To study a company, we look at its strategy, which we define as a chosen course of action. We believe there are 8 strategies common to all companies, from for-profits to nonprofits. We want to know all about the target’s business definition strategy, or mandate as it is called in many nonprofits and all government corporations and agencies. We want to know about its risk, growth, financial management, organization management, R&D/technology, and service delivery strategies (also known as production or manufacturing depending on what the company does). Finally, we want to know about its marketing/sales strategy, known as communication strategy for many nonprofits and government companies and agencies.

We use the understanding of those strategies to identify external factors impacting the performance of each of them.

The exact same approach can be used to understand our current situation for strategic planning; i.e., where we are now.

Question 2: How do you determine where we should want to go? 

Beefy Answer: Selecting one of the 8 strategy categories on which to focus is the key to taking you where you want to go. 

If you truly understand current strategy and the external factors impacting it using the research approach described under step one, you will be able to see clearly where the business is going if you do nothing.

The question then becomes “Do we want to change that direction or are we satisfied with where we are going if we do nothing?”

To change direction requires focusing on one of the 8 strategy categories in order to make desired change happen. That focus will then impact all the other 7 strategy categories. Here’s how it works.

Select which of the eight strategy categories should be the focus of the strategic plan over the next 3 to 5 years. This decision is based on the learning under question 1.

Should we focus on our business definition strategy? Our risk strategy? Our growth strategy? Our financial management strategy? Our R&D/technology strategy? Our organization management (our people) strategy? Our marketing/sales strategy? Our service delivery (production / manufacturing) strategy? The focus on that one strategy category will impact all the other seven over the life of strategic planning

The selection to focus on a specific strategic category as the priority of the strategic plan will set in motion the action to take us where we have decided to go.

Question 3: How do we get there?

Beefy Answer: Identify the impact on the remaining 7 strategy categories of the selected strategy focus in question 2.

This question really drives home the point that the strategic plan is not about developing detailed strategy! The strategic plan provides broad descriptions of strategy. The focus on just one strategy in question 2 leads to a cascading impact on the remaining seven.

Consider the private school that decides, after consideration of the external factors impacting its strategy, that it needs to grow in order to stay relevant and sustainable over the long term. The decision is made to double the number of its students. This is clearly a focus on the growth strategy.

But that single focus quickly involves the service delivery strategy (with a decision to build a new facility), financial management (raising the funds to pay for the facility); marketing (attracting donors); organization management strategy (hiring and orientation of more teachers and staff); risk (all of the issues associated with a doubling in population); and business definition/mandate (how the school defines its business).

And that's the beef we would add to Question 3.

Question 4: How will we know when we get there?

Beefy Answer: The broad description of selected strategy in the strategic plan will tell us when we are there.

The good news is there is no need for question 4.

All the strategic plan needs to do is to describe broad strategy. It should be apparent from the broad description whether or not the strategy has been successfully implemented.

The next iteration of strategy development, commonly known as “business planning”, will describe in detail the recommended implementation plan for the board's approved strategic plan.

Now you have some real food for thought.

There should be a lot of comfort knowing that strategic planning is not a mystical journey. It is a review of strategy already in place across 8 strategy categories. The responsibility of the board is to determine if those strategies remain appropriate given changing external factors and to monitor the implementation by management of authorized strategy.

For more on our strategy thinking, see:  The Alpha Strategies, Understanding Strategy, Risk, and Values in Any Organization free in ebook form at thealphastrategies.com

And be sure to try our interactive, online Drag'n'Drop Strategy tool

Understanding Strategy, Risk, and Values in Any Organization

The Alpha Strategies, Understanding Strategy, Risk, and Values in Any Organization, is a new book on strategy (released February 2013) by Alan W. Kennedy and Thomas E. Kennedy.

The Alpha Strategies gives owners, boards, governance experts, management, strategic and business planners, communications professionals, risk managers and consultants a proven framework to test and communicate strategy.

Organizations face a huge challenge getting everyone on the same page when it comes to strategy.

Directors worry about whether management knows what it is doing. Management wonders whether the board understands the issues. Employees struggle with understanding what they are expected to do. And everyone assumes that a new strategy will always be better than current strategy.

There is clearly a need to be able to reach a common understanding of existing strategy and to understand the impact of changes to it. The Alpha Strategies fills both of these needs.

By bundling three powerful concepts, The Alpha Strategies enables a common understanding of current strategy, including the risks those strategies face, the values that characterize their implementation; and how those strategies might relate to one another differently if the change is implemented.

The authors have found that there are eight strategies common to all for-profit, not-for-profit, and public sector organizations.

One of the eight is always dominant and leads the remaining seven. The eight strategies relate to each other in a way that is unique to each organization. These concepts are not new. The way they are bundled together is new, elegantly simple, and produces extraordinary insights.

Understanding The Alpha Strategies, how they relate to each other, and which is the dominant or leading strategy, is the key to informed strategy decisions and persuasive strategy communication.

Compelling and thought-provoking, The Alpha Strategies is an essential tool for everyone interested in strategy, strategic planning, business planning, risk management and strategy communication.

Visit www.thealphastrategies.com for a free e-book or get a hard or soft copy edition at Amazon:

 http://www.amazon.com/THE-ALPHA-STRATEGIES-UNDERSTANDING-ORGANIZATION/dp/1477152857/ref=sr_1_1?ie=UTF8&qid=1360925475&sr=8-1&keywords=the+alpha+strategies+alan+w+kennedy